From the Economist: Household Income Excerpt: Lemme see, the first quarter of 2010 Obama was still in place. And here I thought US GDP-expansion began with Donald Dork's installation in the White House. Oh darn ...! PS: Just when the hell is the EU going to pull-the-plug-out and start growing again? (Tomorrow?)
Not really. Equivalence scales, by definition, take household income and weight it to derive 'per person' terms. Plenty of poor in areas around Sunderland, so no excuse!
The difficulty with that as a measure is that it's far more sensitive to changes in household size (for example working age children staying at home) than it is to changes in per person income.
It's total income divided by the number of members in a household (living off the income). Duhhhhhhhh ...
...and as such is far more sensitive to changes in household size than it is to changes in income. My sister and brother in law have twin children. They have just left to go to college. The household income per person in that household has just doubled without there being any change to their income. Then again, there are now three households so across the three households the household income per person has dropped significantly even though there are still the same number of people and the income is the same.
Not really. There are numerous equivalence scales. Its easy to test whether the simple version creates any distortion. Typically they don't (with selection of more advanced equivalence scales only marginally impacting on measures such as poverty).
Here you go again. You personal examples are irrelevant in a debate about "economics"! YOU ARE IN AN ECONOMICS FORUM! Where we are debating about what is good for the nation - because of a simple concept. What is best for the nation is best for us individually*. That is the essence of any truly democratic country. In the aggregate - and this includes your tiny world of a family - there exists in the US something called Income Disparity (yeah, look up the definition!) and it is one of the worst of any developed nation. Whyzzat? Ask yourself! Because in the 1980s, we stoopidly elected a second-rate actor to the presidency. Who changed upper-income taxation by diminishing it drastically. (See that observable fact here in this infographic.) What happened? This happened! That 8.9% figure was the low-point for upper-incomes in the US. With Reckless Ronnie's drastic change in upper-income tax-rates, their part-of-the-wealth**-pie soared! And if we want to reinstate Income Taxation fairness we need a far more progressive increase in upper-income tax-rates. In fact, I'd put them back up in the 90% range where they were, and also institute near 100% Inheritance Taxation. There is no use whatsoever that children of the rich, who never spent a day working to earn it, should suddenly become heirs to great fortunes. (Which historically they have had a tendency to piss down a hole in the ground.) The US is back to where it was in 1776, except that there is no monarchy surrounding a King who parcels out land in the US to those who do him favors. (How do you think the state of Pennsylvania got its name?) We are now a democratic republic and the power should be in the hands of the people. But, through a Great Historical Mistake (called the Electoral College), five times in history we have elected the loser of the popular-vote as PotUS. The popular-vote is sacred. It is the foundation-stone upon which all True Democracies are made ... *And not the opposite, which is "taxation that is best for 10% of top-earners is best for the nation!" **Wealth = Income net of taxation.
I'm not arguing about whether income and wealth equality is a problem in the United States (it clearly is) or whether it's getting worse (demonstrably it is). I'm arguing about whether "household income per person" is a meaningful measure. If you want to measure whether or not working people are being paid better then surely tracking average and median income per person (as measured from W2 returns) is the measure. If you want to track whether households are better off, then keep track of household income. Household income per person on the other hand is, IMO, a meaningless measure which is more sensitive to changes in household size and the proportion of people in the household who have income than it is to income itself. A multi-generational household with working parents and older children and live-in grandparents will tend to have a higher household income per person than the nuclear family of two parents and two or three dependant children
This continues to be a non issue. It's quite appropriate to switch to 'per person' terms. Just dividing household income by household income is a basic equivalence scale. Those scales can be more involved (e.g. traditionally Britain, via a more complex weigting system, would control for age of household members). However, this only marginally impacts on measures such as poverty rates. It's certainly not a significant issue to time series or cohort analysis.
No, that will always get you an answer of 1 I think that Household Income per person is a flawed measure because of its sensitivity to household size and makeup - unless you're trying to track the effects of changes to household makeup and size of course. In the OP they are contrasting changes in GDP per person to changes in household income per person. Indeed they even say: Then it puzzles me why they use household income per person instead of household income as a measure.
BILLIONS OF BUCKS First of all, this is an Economics Forum. Get your facts right. There are other forums on this site if one wants to piss-around their emotions ... particularly about the very strange notion that America's market-economy of 320 million living and breathing men, women and children should rightly be ridden by low upper-income taxation that simply makes for behemoth billionaires. And for no more simplistic inanity other than "just because we can". Why is Europe different? Because it has sense of togetherness that is very difficult to establish and maintain on a continent with 20 different languages but still one sole common purpose. "Equitability", meaning fair and impartial. It's called Social Democracy and its definition is: A political, social and economic ideology that promotes Social Justice within the framework of a liberal democratic polity and capitalist economy. SIMPLE TRUTHS All that beautiful phrase says can be consolidated into some simple truths: *Love thy neighbors by allowing them the simple chance to succeed as well and perhaps better than you, a long as the distribution of Income is fair and equitable. *Whereby healthcare and learning are key elements of any existence in any political system, we make sure then in ours both are available to all free, gratis and for nothing (or as close thereto as humanly possible). And finally, *Socialism per se has been shown for it cockamamie idealistic notion that "we are all created equal". We aren't. We are all indeed created equitably however and deserve (for the high taxes we pay) a reasonably decent existence. And no one needs billions-of-bucks-in-the-bank to do so* ... ! I'm a Yank who is living permanently in France, and here is why. Because it is a Social Democracy with (1) free National Health Care for which I am likely to live four years longer than you living in the US, and (2) I assure that my kids will have a post-secondary education (vocational, associates, bachelors, doctorate degree) for less than kilobuck (in euros) a year! And too few people in the US either can or want to understand the great benefit of both ... ! *Earning megabucks has become a national sport in America and, like any sport, the higher the number of points the bigger-n-better the win! As if lotsa-moulah was the driving force of our existence.
Clearly a typing error and you know it. Dividing by household number is the most basic equivalence scale. Your opinion is irrelevant. The choice of equivalence scale may be relevant to micro level analysis (e.g. hypothesis testing with equivalised income as an independent variable). It isn't going to important for macro analysis. It's merely going to ensure a robust means to generate an average. But you're whinging at the equivalence scale. The important aspect there is the bluntness of a GDP measure. That is a poor measure of living standards (e.g. extreme inequalities can generate high GDP but low income standards). Because living standard analysis is based on individual comparison, ensuring standard application of equivalence scale.
You who? If you are in rebuttal to someone in particular, then QUOTE THEM so they can be notified that you answered and they have a chance as well to rebut. That's called a "debate" ...
What does any of this rant have to do with the question of whether household income per person, as opposed to household income, or income per person is a suitable measure of personal financial well-being ? Please point out which facts you believe I have got wrong and I will either apologise or will address the argument.
How can I tell what is a typing error ? I try not to make assumptions. My opinion is as relevant as anyone else's in my view - at least on an internet discussion board. If you want to try to shut down discussions by dismissing all opinions that conflict with yours, you are free to do so. Yes, per capita GDP is a poor measure of living standards for the reasons you mention, and no doubt many others. Is household income per person (on a PPP basis) the gold standard measure of standard of living ?
I don't get why they confused the issue by calling it "household income per person". Is that somehow different from income per person, or average income, or per capita income?
The bleedin obvious helps! You're free to have your right wing opinions, of course. Your opinion is irrelevant here as there is no debate, only your knowledge deficiency. I've also told you why. That wasn't my opinion. They were mere facts. Why would it be? That would only be relevant if we were comparing equivalised income across countries and across time. Here we are simply acknowledging the differences across household income and GDP measure.
So does proof reading if you're going to get bent out of shape about it. I know that my posts are full of typographical errors which is why I don't tend to sweat it. I'm not entirely sure why querying whether household income per person is a good measure of personal financial wellbeing is a right-wing opinion. Regarding whether my opinions are right-wing, you may want to check the settings on your Overton window. Then what does the graph in the OP show ? If I'm reading it correctly, then household income per person in the US and Canada is increasing faster than GDP growth, but in the Eurozone it's increasing more slowly. The inference from that would be that, in the US and Canada, inequality is falling, but in the Eurozone it's rising. That seems to run counter to the other evidence that the US is more unequal than pretty much any other developed economy and that the inequality is growing faster. Now if I've got it completely backwards and in fact the graph shows that the US and Canada are worst and the UK is best then that's also a bit of a head-scratcher because, by European standards, UK inequality is high and growing. If that graph is right, and the US is doing it right, then that's uncomfortable news for people like me who prefer (comparatively) high tax rates and (comparatively) generous welfare safety nets. Instead it seems like low tax, low welfare economies are those which do best by that measure (which is, in part, why I was questioning the measure).[/QUOTE]
Yes household income per person is household income/number of people in household Two adults earning £20,000 between them with two children gives a household income per person of £5k Average income would be £10k because there are two people Per capita income sounds like the measure I'd like to use but the article is focusing on household income (as opposed to income per person) as a key indicator for financial wellbeing. Perhaps that's because a household with a high proportion of earners, and a higher overall income, even if they don't earn a huge amount is likely to be better off a household where only one person earns, even if it is a larger wage...
Stick with the bleedin obvious, its good for the soul! Keep up! The use of household income per person is just sense and consistent with welfare economics. Its either a macroeconomic measure or a microeconomic use of equivalised income. That doesn't matter. Consistency is maintained. There is no opinion. That is just fact. Your opinions, and they are right wing, can be wielded elsewhere. The clue is in the title: difference between growth in household income per person and GDP per person. As its a comparison between household income and GDP measure, reference to PPP makes naff all sense. It actually means very little. There are numerous reasons for the difference between the two measures: from tax to gross inequality. There is no happy tale to be had: just acceptance of the stupidity of using GDP measures. For Britain, we just know the obvious: the financial crisis has been very costly, but its the working people who have paid for that cost. If you wanted something meaningful (which can be difficult from a neoliberal rag like the Economist) then stick to aspects such as Gini Coefficients and social mobility indicators.
I'm sorry, I misunderstood. I thought that the household income per person would have some factor relating to purchasing power otherwise it could be quite misleading either when comparing between countries or across time. If household income per person has risen 10% but prices have risen 20%, purchasing power has fallen. If prices have stayed stable then purchasing power has risen. What a silly article it is then. Using a meaningless graph as a way to illustrate that something is wrong somewhere. The OP seemed to say that the Eurozone needed to pull its finger out based on that graph.
In other words, they take data and massage it ("weight it") to get the answer they want. Just more economic bullshit from the communists loons.
